Understanding the local economy
The first step in strengthening the local economy is understanding how it works.
Hustedde, Shaffer and Pulver (2005) describe local economies as being like a barrel with money and goods flowing in the top as well as spilling out. The barrel represents a pool of local resources and economy activity. Money flows into communities through the sale of outputs from the community. Outputs are not just the sale of commodities like wheat or cattle — they can be anything that brings money into the community, such as tourists visiting the community, families from outside the community paying school fees, or retirees or commuters moving into the community.
Like water in the barrel, money circulates within the community. People purchase and sell goods and services to each other within the community. Money and resources leak out of local communities through people spending outside the community, people leaving the community or resources being lost, such as in unemployment or in the decline of natural resources.
Analysing the local economy gives a clear picture of issues such as the extent of leakage, the recirculating of money and the diversity of businesses.
Extra resources
- ‘Strategies for Community Economic Development’ by Eric Scorsone is a US-based but user-friendly overview of understanding your local economy.
- Hustedde, R., Shaffer, R. and Pulver, G. (2005) Community Economic Analysis: A How To Manual. North Central Regional Center for Rural Development, Iowa State University.
- Census data or other information such as employment in different industry sectors, household income, and the size of businesses is helpful in analysing the local economy. Data is available from sources such as the Australian Bureau of Statistics and the Queensland Government Office of Economic and Statistical Research.
